Recent B.C. Court Judgements Favour Insurers

In a departure from our usual e-mail bulletin format, and since insurers have recently enjoyed quite a run of success in the B.C. Courts, we now briefly report on three decisions which will be of interest to the industry. They address fraudulent Proofs of Loss, no-fault accident benefits for out-of-province auto insurers, and cost awards in bad faith cases.

Failing to Read Proof of Loss before Signing Vitiates Entire Claim

In the recent case of Sienema v. B.C. Insurance Co., the Court of Appeal has confirmed that swearing a “Proof of Loss” for submission to an insurer, without reading the contents of the scheduled particulars and without an actual and honest belief that the particulars were correct, constitutes a “wilfully false statement” which vitiates the entire claim under the policy pursuant to Statutory Condition 7.

In this case, the particulars in the Proof of Loss were actually prepared by the husband (interestingly enough, formerly employed in the insurance industry) but was sworn by the wife. The particulars overstated the cost of certain furniture and other items and, in one instance, provided the incorrect acquisition source for another disputed item. The Notary Public before whom the Proof of Loss was sworn, did not remember the particular transaction, but testified his invariable practice was to ask if the deponent had both read and understood the document before asking her to swear it to be true. In this case, the wife later testified that she believed the particulars were true because her husband had completed them but she didn’t really know because she had not read the document.

The Court drew a distinction between a wilfully false document and one presented carelessly or thoughtlessly. It noted “it is possible to imagine a case where a person has an honest belief that the document contents are true on the strength of assurances received from another person”. But, after an analysis of the very detailed evidence submitted by the insurer, the Court essentially rejected the wife’s evidence that she believed the document to be true because she relied on her husband. If she had read the document, she would likely have realized some of the information was incorrect. Hence, she made wilfully false statements in swearing that the value given for the contents was true and the entire claim was vitiated.

The case is also interesting because the insurer had counter-claimed against the insureds to recover the advance payments made under the policy. Judgment was granted against the insureds in that regard for approximately $250,000.

The trial judgment, which is an excellent example of how an insurer should present cases of this sort, can be accessed at:
http://www.courts.gov.bc.ca/jdb-txt/sc/02/00/2002bcsc0084.htm
The Court of Appeal judgment is available at:
http://www.courts.gov.bc.ca/jdb-txt/ca/03/06/2003bcca0669.htm

Out of Province Auto Insurer Avoids B.C. No-Fault Benefits

If an auto accident occurs in B.C. involving a vehicle from another province or state, must the latter auto insurer extend no-fault medical and disability benefits to the (usually much higher) B.C. limits?

In a surprise ruling, the B.C. Court of Appeal has now effectively reversed a number of earlier decisions on the point and has held that the “old form” Power of Attorney and Undertaking (PAU) document filed by auto insurers in Canada does not require such insurers to pay the higher B.C. benefits.

In Batchelder v. Filewich, the American auto insurer had filed the PAU with the Superintendent of Insurance back in 1964. This “old form” PAU provided that the insurer “would not set up any defence to any claim under a motor vehicle liability insurance contract….which might not be set up if that contract had been entered into in [B.C.]”. While previous decisions had recognized that the standard auto policy back in 1964 did not contain any form of no-fault benefit coverage, they had nevertheless interpreted the PAU to include the later development of no-fault benefits coverage so as to promote the whole scheme of inter-provincial reciprocity.

The Court of Appeal ruled these earlier decisions were wrongly decided on this point and that the “old form” PAU applied only with respect to liability coverage and not with respect to no-fault benefits. Hence, in the Batchelder case, the out-of-province insurer was required to provide no-fault benefits only up to its own U.S. $5,000 limits and did not have to pay such benefits up to the B.C. limits up to $150,000. The Court of Appeal decision can be accessed at
http://www.courts.gov.bc.ca/jdb-txt/ca/04/00/2004bcca0050.htm

It should be noted that this decision will only assist out-of-province auto insurers who have filed the old form PAU. Exposure to the (much higher) B.C. benefits still exists for out-of-province insurers who:

• have filed a “new form” PAU (since 1988);

• are licensed to carry on insurance in B.C.;

• inserted “benefits-matching” obligations in their own polices; or

• are subject to legislation in their “home” province/state which requires such matching.

More technical information on these points is available either on our website or by asking any lawyer in Clark Wilson's insurance litigation group.

Costs Against Plaintiff’s Solicitor for Bad Faith Claim

In Chaplin v. Sun Life Assurance the B.C. Supreme Court awarded hefty costs against a plaintiff’s lawyer who had “hijacked” the plaintiff’s action on a disability policy, engaged “on a frolic of his own” for “what he envisaged as an enormous potential award of punitive damages for his own benefit as a stakeholder through his contingency fee”. The Court cast aspersions on the competence of counsel, his “lack of judgment and occasional arrogance” and various other aspects of the claim which were described as being “reprehensible”.

Some of the allegations resembled a novel by John Grisham. For example, the hapless insurer was alleged to have “a corporate strategy to avoid payment of disability claims” and to have paid employees “bonuses for their participation in the scheme from the claims monies saved”. These were extremely serious allegations of dishonesty without a shred of proof and which were pursued to trial long after they should have been dropped.

The case, which is worth reading for its entertainment value alone, is accessible at
http://www.courts.gov.bc.ca/jdb-txt/sc/04/01/2004bcsc0116.htm

Readers with questions on any ofthe above cases are welcome to contact Nigel Kent at npk@cwilson.com or 604-643-3135.